Colombia
During the 1970s Colombia configured the “National Health System,” which incorporated not only the network of public health services but also many foundations and private as well as faith based entities. In theory, the Ministry of Public Health had responsibility over all of these institutions, but in practice the institutions operated with great autonomy. Throughout the 1980s, international state modernization trends led to two overarching changes in Colombia’s institutional makeup. The first was fiscal, political, and institutional decentralization, which led to devolution of power to the states. The second was the introduction of market mechanisms in the management and organization of social and public services. These two changes laid the political-economic foundation for the 1993 healthcare system reform.
During the 1970s Colombia configured the “National Health System,” which incorporated not only the network of public health services but also many foundations and private as well as faith based entities. In theory, the Ministry of Public Health had responsibility over all of these institutions, but in practice the institutions operated with great autonomy. Throughout the 1980s, international state modernization trends led to two overarching changes in Colombia’s institutional makeup. The first was fiscal, political, and institutional decentralization, which led to devolution of power to the states. The second was the introduction of market mechanisms in the management and organization of social and public services. These two changes laid the political-economic foundation for the 1993 healthcare system reform.
Prior to the passing of law 100 in 1993, which reconfigured Colombia’s health system, the country’s healthcare structure was fragmented into three disparate spheres. First, the Ministry of Health (MoH) provided free or low-cost care in government run institutions. By constitutional mandate, the MoH was responsible for providing healthcare to all Colombians. Second, the Instituto de Seguros Sociales (ISS), or Social Security Institute, covered those whose companies or public institutions contributed to part of their social security payments. Lastly, private insurance covered those who were willing and able to pay for it. Under this system, 15% of the population was covered by social security and another 15% was covered by private insurance, while the rest of the population used the public health system for its healthcare needs.
The public system under the MoH was largely financed by public funds from the national treasury. General taxation supported a large network of public hospitals and clinics. Despite this fact, more than half of total spending on health was out-of-pocket. Under this scheme, the public facilities were meant to primarily deliver care to the poorer segments of the population, yet only 20 % of individuals receiving care in public hospitals were from the poorest income quintile. Furthermore, it has been estimated that prior to the reform, nearly 60% of those who were ill and required medical attention did not seek it due to its associated costs.
Under this system, the second sphere included formal sector workers who paid mandatory contributions to closed pools in which they were enrolled. Private sector workers were covered by the ISS, which was a large social insurance scheme. Public sector workers, on the other hand, were enrolled in funds that were exclusive to state-owned enterprises or particular government units. There were over 1,000 of these types of public funds. Neither private nor public enrollees were permitted to opt-out to another fund. Furthermore, there was no risk pooling among any of these funds which led to atomicity and low levels of risk sharing. Also, private insurance companies did not participate in this obligatory health finance system. Health care provision for those under the social security regime was provided through vertically integrated networks of public facilities and providers.
Colombia
Historical Context
During the 1970s Colombia configured the “National Health System,” which incorporated not only the network of public health services but also many foundations and private as well as faith based entities. In theory, the Ministry of Public Health had responsibility over all of these institutions, but in practice the institutions operated with great autonomy. Throughout the 1980s, international state modernization trends led to two overarching changes in Colombia’s institutional makeup. The first was fiscal, political, and institutional decentralization, which led to devolution of power to the states. The second was the introduction of market mechanisms in the management and organization of social and public services. These two changes laid the political-economic foundation for the 1993 healthcare system reform.
Prior to the passing of law 100 in 1993, which reconfigured Colombia’s health system, the country’s healthcare structure was fragmented into three disparate spheres. First, the Ministry of Health (MoH) provided free or low-cost care in government run institutions. By constitutional mandate, the MoH was responsible for providing healthcare to all Colombians. Second, the Instituto de Seguros Sociales (ISS), or Social Security Institute, covered those whose companies or public institutions contributed to part of their social security payments. Lastly, private insurance covered those who were willing and able to pay for it. Under this system, 15% of the population was covered by social security and another 15% was covered by private insurance, while the rest of the population used the public health system for its healthcare needs.
The public system under the MoH was largely financed by public funds from the national treasury. General taxation supported a large network of public hospitals and clinics. Despite this fact, more than half of total spending on health was out-of-pocket. Under this scheme, the public facilities were meant to primarily deliver care to the poorer segments of the population, yet only 20 % of individuals receiving care in public hospitals were from the poorest income quintile. Furthermore, it has been estimated that prior to the reform, nearly 60% of those who were ill and required medical attention did not seek it due to its associated costs.
Under this system, the second sphere included formal sector workers who paid mandatory contributions to closed pools in which they were enrolled. Private sector workers were covered by the ISS, which was a large social insurance scheme. Public sector workers, on the other hand, were enrolled in funds that were exclusive to state-owned enterprises or particular government units. There were over 1,000 of these types of public funds. Neither private nor public enrollees were permitted to opt-out to another fund. Furthermore, there was no risk pooling among any of these funds which led to atomicity and low levels of risk sharing. Also, private insurance companies did not participate in this obligatory health finance system. Health care provision for those under the social security regime was provided through vertically integrated networks of public facilities and providers.
Law 100 of 1993 established the guidelines for the reform of the social security system in Colombia. The first change involved unifying the existing social security, public, and private financing institutions under the umbrella of the General System of Social Security in Health (SGSSS). The reform aimed to create quality-centered competition among service providers and insurers by (1) allowing insurers to negotiate service rates with both public and private providers, and by (2) allowing people the freedom to choose their insurer. As of December 2008, 90% of the population (39,719,476 people) was covered under the SGSSS.
Law 100 of 1993 established the guidelines for the reform of the social security system in Colombia. The first change involved unifying the existing social security, public, and private financing institutions under the umbrella of the General System of Social Security in Health (SGSSS). The reform aimed to create quality-centered competition among service providers and insurers by (1) allowing insurers to negotiate service rates with both public and private providers, and by (2) allowing people the freedom to choose their insurer. As of December 2008, 90% of the population (39,719,476 people) was covered under the SGSSS.
Within the SGSSS the reform created two parallel insurance schemes to target different sectors of the population—a Contributive Regime (CR), which targets the higher income population, and a Subsidized Regime (SR), which targets the lower income population. The CR is mandatory for all formal and informal workers who earn at least one minimum salary per month—as defined by the Ministry of Social Protection and which was equal to USD223 in 2007. The contribution for formal employees is 12.5% of 40% of their monthly wage (Wage40%12.5%); 8.5% is paid by employers and 4% is paid by employees. The self-employed (or informal workers) must pay the entire 12.5% contribution. All of these contributions are collected by Health Promoting Entities (EPS), which are either private (for profit or not-for-profit) or public insurers. The insured enroll with an EPS of their choice. In 2007, 8% of the enrolled population was affiliated with a public EPS, while 92% was affiliated with a private EPS. In 2005 there were 21 EPSs to choose from. The EPSs are responsible for channeling the contributions to the Solidarity and Guarantee Fund (FOSYGA), where the funds are pooled, making it possible to cross-subsidize care for the poor. After the cross-subsidy occurs, funds are then returned to the EPS in the form of a capitation payment unit (UPC). EPSs are then responsible for making appropriate payments to providers for services received by the insured.
The second scheme is the Subsidized Regime (SR), which was designed for the poor and indigent population. This target population is identified through the Selection System of Beneficiaries for Social Programs (SISBEN), which is a proxy-means test designed to identify the most vulnerable members of a municipality. This SISBEN index is calculated at the household level through the use of a questionnaire. There are six score levels, 1 being the poorest. Levels 1, 2, and 3 qualify for the SR. The insurer for those enrolled in the SR is known as a Health Promoting Entity of the Subsidized Regime (EPSS) and functions similarly to the EPS with the exception that it does not collect any contributions from those whom it insures.
Of the 12.5% total contribution per individual to the Contributory Regime, the FOSYGA channels 1.5% into the Subsidized Regime (SR) as a solidarity contribution, while the remaining 11% stays in the CR. Thus, FOSYGA provides cross-subsidies between the wealthy and the poor, the sick and the healthy, and the old and the young.
A third prong to the provision of services is the Basic Health Plan (PBS). This plan is a safety net financed by general taxes that is composed of public hospitals and health centers. While all citizens are eligible to receive the benefits under this plan, it primarily serves those who have not yet been enrolled in either the CR or the SR and those who are enrolled in the SR but require services that are not yet covered under its benefits package. These services are paid for by state funds. In general, interventions that exhibit high externalities such as deparasitization and the early treatment and control of contagious diseases such as tuberculosis and malaria are paid for out of national coffers. The national plan is to slowly shift away from these supply-side policies toward demand-side policies through the expansion of insurance premiums for the poor. This is supposed to promote efficiency and quality, as potential revenues will no longer be stationary but will follow the patients.
As of December 2008, 39% of the population (17,234,265 people) was covered under the CR and 51% of the population (22,485,211 people) was covered under the SR. Meanwhile, 10% of the population (4,730,784 people) had no insurance coverage. Furthermore, by March 2009 there were 1,115,789 people covered under the partial subsidy scheme.
Colombia
Summary of Reforms
Law 100 of 1993 established the guidelines for the reform of the social security system in Colombia. The first change involved unifying the existing social security, public, and private financing institutions under the umbrella of the General System of Social Security in Health (SGSSS). The reform aimed to create quality-centered competition among service providers and insurers by (1) allowing insurers to negotiate service rates with both public and private providers, and by (2) allowing people the freedom to choose their insurer. As of December 2008, 90% of the population (39,719,476 people) was covered under the SGSSS.
Within the SGSSS the reform created two parallel insurance schemes to target different sectors of the population—a Contributive Regime (CR), which targets the higher income population, and a Subsidized Regime (SR), which targets the lower income population. The CR is mandatory for all formal and informal workers who earn at least one minimum salary per month—as defined by the Ministry of Social Protection and which was equal to USD223 in 2007. The contribution for formal employees is 12.5% of 40% of their monthly wage (Wage40%12.5%); 8.5% is paid by employers and 4% is paid by employees. The self-employed (or informal workers) must pay the entire 12.5% contribution. All of these contributions are collected by Health Promoting Entities (EPS), which are either private (for profit or not-for-profit) or public insurers. The insured enroll with an EPS of their choice. In 2007, 8% of the enrolled population was affiliated with a public EPS, while 92% was affiliated with a private EPS. In 2005 there were 21 EPSs to choose from. The EPSs are responsible for channeling the contributions to the Solidarity and Guarantee Fund (FOSYGA), where the funds are pooled, making it possible to cross-subsidize care for the poor. After the cross-subsidy occurs, funds are then returned to the EPS in the form of a capitation payment unit (UPC). EPSs are then responsible for making appropriate payments to providers for services received by the insured.
The second scheme is the Subsidized Regime (SR), which was designed for the poor and indigent population. This target population is identified through the Selection System of Beneficiaries for Social Programs (SISBEN), which is a proxy-means test designed to identify the most vulnerable members of a municipality. This SISBEN index is calculated at the household level through the use of a questionnaire. There are six score levels, 1 being the poorest. Levels 1, 2, and 3 qualify for the SR. The insurer for those enrolled in the SR is known as a Health Promoting Entity of the Subsidized Regime (EPSS) and functions similarly to the EPS with the exception that it does not collect any contributions from those whom it insures.
Of the 12.5% total contribution per individual to the Contributory Regime, the FOSYGA channels 1.5% into the Subsidized Regime (SR) as a solidarity contribution, while the remaining 11% stays in the CR. Thus, FOSYGA provides cross-subsidies between the wealthy and the poor, the sick and the healthy, and the old and the young.
A third prong to the provision of services is the Basic Health Plan (PBS). This plan is a safety net financed by general taxes that is composed of public hospitals and health centers. While all citizens are eligible to receive the benefits under this plan, it primarily serves those who have not yet been enrolled in either the CR or the SR and those who are enrolled in the SR but require services that are not yet covered under its benefits package. These services are paid for by state funds. In general, interventions that exhibit high externalities such as deparasitization and the early treatment and control of contagious diseases such as tuberculosis and malaria are paid for out of national coffers. The national plan is to slowly shift away from these supply-side policies toward demand-side policies through the expansion of insurance premiums for the poor. This is supposed to promote efficiency and quality, as potential revenues will no longer be stationary but will follow the patients.
As of December 2008, 39% of the population (17,234,265 people) was covered under the CR and 51% of the population (22,485,211 people) was covered under the SR. Meanwhile, 10% of the population (4,730,784 people) had no insurance coverage. Furthermore, by March 2009 there were 1,115,789 people covered under the partial subsidy scheme.
Colombia has made great strides toward its goal of universal health coverage. However, there certain issues remain that will greatly impact the future performance of the system.
Colombia has made great strides toward its goal of universal health coverage. However, there certain issues remain that will greatly impact the future performance of the system.
The Colombian legal system acts as a reasonable protector of patients' rights. However, recent rulings have exposed some weaknesses of the very system that is entrusted to provide these rights. Ruling T-760 was intended to eliminate disparity in the health benefits package offered to the poor in the SR. Unless the MPS meets deadlines to design a new insurance plan that revises covered benefits, this ruling will automatically extend the benefits included in the CR to the indigent population in the SR. Since the October 2009 deadline for a redesign was not met, full CR benefits have been extended to children within the SR. While Colombia currently spends between 7% and 9% of its GDP on health, recent estimates have indicated that expanding CR benefits to the entire population would significantly increase spending as a percentage of GDP. Clearly, a new balance must be struck between the provision of comprehensive benefits and the financial sustainability of the system.
On another front, due to the capitation payments received by insurers from FOSYGA, insurers currently have no incentives to collect contributions based on the actual wages of those enrolled in the CR. While law 797 and decree 1703 appear to have decreased the gap in revenue collection by almost 50% during their first year of implementation, there still exists a 17% gap. This indicates that incentives must be created to ensure that EPSs collect contributions on the basis of actual income earned. Furthermore, the government has a fund to finance interventions that are not covered by insurers but are deemed worthwhile by the Constitutional Court. Thus, insurers are incentivized not to expand services within their plans. This state of affairs exacerbates the cost of healthcare and precludes serious competition among insurers, which is one of the advantages of operating within a market system.
Another example of the potential misfiring within the market structure is the fact that as a matter of law, EPSSs must contract a minimum of 40% of their network with public providers. The logic behind this provision is that the lack of a profit motive forces private providers to become more efficient while maintaining high quality standards. However, some have argued that such rules may inhibit the efficient allocation of resources within a market economy. Arguments state that such regulation leads to artificial inflation, does not permit EPSSs to compare quality and cost or to purchase the best services, limits choice among the poor, and de-incentivizes public hospitals from improving efficiencies. Further research is necessary to come to more definitive conclusions.
From a managerial perspective, there remains a dual challenge within the information management arena. First, EPSs must work to enhance their back-office information management systems, as not all insurers have complied with established quality standards. Second, health service providers must become more efficient at actualizing, validating, and transferring information to the MPS. Without a trustworthy data bank for decision makers, critical and important decisions become mired in conjectures and guesswork.
Finally, the financial sustainability of the system must be analyzed within the context of growth expectations for both formal-sector employment and self-employed inclusion into the CR. If these two categories of enrollees do not increase, revenue flow into the health system may not increase and may even decline. Therefore, mechanisms must be put in place to carefully analyze this situation and to implement steps to make sure the sustainability of the system is not compromised.
Colombia
The Way Forward
Colombia has made great strides toward its goal of universal health coverage. However, there certain issues remain that will greatly impact the future performance of the system.
The Colombian legal system acts as a reasonable protector of patients' rights. However, recent rulings have exposed some weaknesses of the very system that is entrusted to provide these rights. Ruling T-760 was intended to eliminate disparity in the health benefits package offered to the poor in the SR. Unless the MPS meets deadlines to design a new insurance plan that revises covered benefits, this ruling will automatically extend the benefits included in the CR to the indigent population in the SR. Since the October 2009 deadline for a redesign was not met, full CR benefits have been extended to children within the SR. While Colombia currently spends between 7% and 9% of its GDP on health, recent estimates have indicated that expanding CR benefits to the entire population would significantly increase spending as a percentage of GDP. Clearly, a new balance must be struck between the provision of comprehensive benefits and the financial sustainability of the system.
On another front, due to the capitation payments received by insurers from FOSYGA, insurers currently have no incentives to collect contributions based on the actual wages of those enrolled in the CR. While law 797 and decree 1703 appear to have decreased the gap in revenue collection by almost 50% during their first year of implementation, there still exists a 17% gap. This indicates that incentives must be created to ensure that EPSs collect contributions on the basis of actual income earned. Furthermore, the government has a fund to finance interventions that are not covered by insurers but are deemed worthwhile by the Constitutional Court. Thus, insurers are incentivized not to expand services within their plans. This state of affairs exacerbates the cost of healthcare and precludes serious competition among insurers, which is one of the advantages of operating within a market system.
Another example of the potential misfiring within the market structure is the fact that as a matter of law, EPSSs must contract a minimum of 40% of their network with public providers. The logic behind this provision is that the lack of a profit motive forces private providers to become more efficient while maintaining high quality standards. However, some have argued that such rules may inhibit the efficient allocation of resources within a market economy. Arguments state that such regulation leads to artificial inflation, does not permit EPSSs to compare quality and cost or to purchase the best services, limits choice among the poor, and de-incentivizes public hospitals from improving efficiencies. Further research is necessary to come to more definitive conclusions.
From a managerial perspective, there remains a dual challenge within the information management arena. First, EPSs must work to enhance their back-office information management systems, as not all insurers have complied with established quality standards. Second, health service providers must become more efficient at actualizing, validating, and transferring information to the MPS. Without a trustworthy data bank for decision makers, critical and important decisions become mired in conjectures and guesswork.
Finally, the financial sustainability of the system must be analyzed within the context of growth expectations for both formal-sector employment and self-employed inclusion into the CR. If these two categories of enrollees do not increase, revenue flow into the health system may not increase and may even decline. Therefore, mechanisms must be put in place to carefully analyze this situation and to implement steps to make sure the sustainability of the system is not compromised.